Under what circumstances are the long-lived assets of a Golden Krust Caribbean Restaurant reviewed for impairment?
Golden_Krust_Caribbean_Restaurant Franchise · 2024 FDDAnswer from 2024 FDD Document
Long-lived assets, such as property and equipment and ROU operating assets, are reviewed for impairment when changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the long-lived asset (or asset group) exceeds its fair value and the carrying amount is not recoverable, an impairment loss is recognized. An impairment loss is measured as the amount by which the long-lived asset (or asset group) exceeds its fair value. Fair value is determined through various valuation techniques including undiscounted cash flow models, quoted fair values and third-party independent appraisals.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to the 2024 Golden Krust Caribbean Restaurant Franchise Disclosure Document, the company reviews long-lived assets for impairment when circumstances suggest that the asset's carrying amount may not be recoverable. Long-lived assets include property, equipment, and ROU (Right-of-Use) operating assets.
If the carrying amount of the long-lived asset exceeds its fair value and is not recoverable, Golden Krust Caribbean Restaurant will recognize an impairment loss. The impairment loss is calculated as the difference between the asset's carrying amount and its fair value.
To determine fair value, Golden Krust Caribbean Restaurant employs various valuation techniques. These techniques include undiscounted cash flow models, quoted fair values, and third-party independent appraisals. This means that the company assesses the potential future cash flows from the asset, market values, and external expert opinions to estimate the asset's worth.